Section 208

Section 208 — the law in short

What the courts have decided on section 208, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• DIT v Mitsubishi Corporation Supreme CourtCuts both ways
  My Indian payer did not deduct tax at source and paid me gross. The Assessing Officer says I should have paid advance tax and has charged s.234B interest. Which years can he do that for?
  Only from financial year 2012-13 onwards. The Supreme Court held that for every assessment up to and including financial year 2011-12, s.209(1)(d) entitled the assessee to reduce, in computing its advance tax, the income-tax that WOULD BE deductible at source, even though it had in fact received the full amount without deduction — so no s.234B interest could be charged. The proviso to s.209(1)(d) inserted by the Finance Act 2012 with effect from 1 April 2012 reverses that, and from financial year 2012-13 the assessee cannot reduce tax that the payer failed to deduct.
• JCIT v Rolta India Ltd Supreme CourtHelps department
  My company paid no advance tax because we only knew we would fall under MAT once the accounts were audited — is interest under sections 234B and 234C still chargeable on the tax on book profit?
  Yes. The Supreme Court held on 7 January 2011 that interest under sections 234B and 234C is payable on failure to pay advance tax in respect of tax payable under section 115JA or section 115JB. Neither interest section makes any exception for the minimum alternate tax, and assessed tax means the tax determined on regular assessment, which is the tax determined by applying those provisions. Both sections 115JA and 115JB expressly say that all other provisions of the Act apply to a MAT company, and the Finance Acts provided for advance tax on them. Circular No. 13/2001 therefore has no application.
• M/s Gie Jewells v PCIT High CourtHelps departmentNo later treatment found
  My client is a firm, not a company. It paid alternate minimum tax under s.115JC when it filed its return, along with the accountant's report. The Assessing Officer has charged interest under s.234B for not paying that tax as advance tax. Can advance tax provisions apply to AMT?
  Yes, on this Court's view. The Rajasthan High Court dismissed the assessee's appeals, holding that having retained the amount which was supposed to be paid under s.115JC, s.234B was rightly invoked, and that no substantial question of law arose from the Tribunal's treatment of s.115JC on the same footing as s.115JA and s.115JB for the purpose of the advance-tax obligation under s.208.
• CIT-II v SAB Industries High CourtHelps taxpayerNo later treatment found
  A retrospective amendment has taken away the deduction I claimed, and the Assessing Officer has charged s.234B interest on the resulting tax. Must I pay the interest as well as the tax?
  The Punjab & Haryana High Court held not. Where the claim was made before the amendment and the amendment came into force later with retrospective effect, the assessee could not have been expected to know on the relevant date that the claim would be unavailable; he is liable for the tax by reason of the retrospective amendment, but he cannot be held liable for interest.
• CIT v Smt. Premlata Jalani High CourtHelps taxpayer
  My capital gain arose after 15 March, so I could not have paid advance tax on it in any instalment. The Assessing Officer has charged s.234C interest from the first instalment date. Can he?
  No. The Rajasthan High Court held that the liability to pay advance tax on a capital gain arises only once the gain has accrued, so interest under s.234C on the shortfall attributable to that gain can run only from the date the advance tax on it became payable, and not from any earlier instalment date. Where the gain arose after 15 March, the proviso required only that the tax be paid by 31 March, and interest ran for that period alone.
• Dr. Prannoy Roy v CIT High CourtHelps taxpayer
  I paid the whole tax before the due date but filed the return eleven months late. The Assessing Officer has still charged interest under s.234A. Can he?
  No, not on tax already in the Revenue's hands before the due date. The Delhi High Court held that s.234A creates a compensatory levy, not a penalty, so where the tax was deposited before the due date of filing the return the Revenue has suffered no loss and no interest under s.234A is payable; interest runs only on tax not deposited before that date.
• Statutory position — ss.207(1) and 208: who has to pay advance tax at all, and the ten thousand rupee threshold CBDT Circulars & InstructionsCuts both ways
  The notice charges me interest under s.234B for not paying advance tax. Before I argue about the computation, was I even liable to pay advance tax in the first place?
  Two conditions have to be satisfied before any advance tax liability arises. Section 207(1) makes tax payable in advance during a financial year, in accordance with ss.208 to 219, in respect of the total income of the assessee which would be chargeable for the assessment year immediately following that financial year — that income being called the "current income"; and s.208 then says advance tax shall be payable during a financial year only in every case where the amount of such tax payable by the assessee during that year, computed in accordance with Chapter XVII-C, is ten thousand rupees or more.
• Statutory position — s.219: advance tax is a payment of tax for the year, and credit for it must be given in the regular assessment CBDT Circulars & InstructionsCuts both ways
  The assessment order taxes the year but the computation sheet has not given credit for the advance tax my client paid, or has credited it to the wrong year. What is the statutory basis for insisting on the credit?
  Section 219 is the answer and it is a single sentence: any sum, other than a penalty or interest, paid by or recovered from an assessee as advance tax in pursuance of Chapter XVII shall be treated as a payment of tax in respect of the income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable, and credit therefor shall be given to the assessee in the regular assessment. So the section does two things: it characterises advance tax as a payment of tax rather than a deposit, and it fixes the year to which that payment belongs by reference to the financial year in which the tax was payable.
• Statutory position — s.207(2): a resident individual of sixty or more with no business income is outside advance tax altogether CBDT Circulars & InstructionsCuts both ways
  My client is 71, resident, retired, and lives on pension, interest and capital gains. The CPC intimation charges her interest under s.234B and s.234C. Is she liable to advance tax at all?
  No. Section 207(2) says in terms that the provisions of sub-section (1) shall not apply to an individual resident in India who (a) does not have any income chargeable under the head 'Profits and gains of business or profession' and (b) is of the age of sixty years or more at any time during the previous year. Once s.207(1) does not apply, there is no advance tax liability to default on, and s.234B and s.234C — which both operate on an assessee liable to pay advance tax under s.208 — have nothing to attach to.
• Statutory position — s.209(1)(d) and its proviso: credit against advance tax for tax deductible but not actually deducted CBDT Circulars & InstructionsCuts both ways
  My client is a payee whose income should have suffered TDS but the payer deducted nothing. Can he still reduce his advance tax by that tax when computing his liability, and does it matter which year it is?
  It depends entirely on which side of 1 April 2012 the financial year falls. Clause (d) of s.209(1) reduces the income-tax computed under clause (a), (b) or (c) by 'the amount of income-tax which would be deductible or collectible at source during the said financial year' on income taken into account in the computation — words wide enough to cover tax that was deductible but never deducted; but the proviso inserted in clause (d) by s.83 of the Finance Act, 2012 removes that reduction where 'the person responsible for deducting tax has paid or credited such income without deduction of tax', so from the financial year 2012-13 onwards a payee who was in fact paid gross cannot use the deductible-but-not-deducted amount to wipe out his advance tax.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.